UPDATE 1-Meningitis outbreak tangles 2 pharmacies with common owners

Wednesday, 10 Oct 2012 | 9:19 PM ET

SHARES

(Updates with details from Massachusetts health department)

By Tim McLaughlin and Toni Clarke and Aaron Pressman

BOSTON, Oct 10 (Reuters) - A Massachusetts company that mixes drugs for hospitals on Wednesday gave up an attempt to distance itself from an affiliated pharmacy linked to a deadly U.S. outbreak of fungal meningitis.

Ameridose LLC agreed to close down for 12 days while state and federal officials investigate the New England Compounding Center, which distributed thousands of vials of a contaminated steroid made at a shabby brick complex next to a waste and recycling operation in a western suburb of Boston.

The pharmacies are owned by Gregory Conigliaro, an engineer, and his brother-in-law, Barry Cadden, a pharmacist who was in charge of pharmacy operations at NECC. The waste and recycling facility is another of Conigliaro's business interests.

Ameridose and NECC mix, dilute and prepare drugs into formulations not typically available through pharmaceutical manufacturers from facilities in Massachusetts. NECC has surrendered its license and recalled its products in the wake of the meningitis outbreak, which has claimed a dozen lives.

In the late 1990s, Conigliaro invented a way to turn the plastic in old computers and television sets into an asphalt substitute to repair roads. The product generated national attention. One headline read: "Pothole Filler Gives New Meaning to Information Highway."

Hazel O'Leary, the U.S. Energy Secretary at the time, praised the company's recycling efforts in 1995 during an "Eco Expo" in Boston.

Such plaudits are now few and far between.

Ameridose said in a statement that as part of an agreement with the Massachusetts Board of Registration in Pharmacy, Cadden has agreed to resign all corporate positions at Ameridose, where he was listed in its latest annual report as a manager.

According to O'Neill and Associates, a public relations firm hired by Ameridose, Cadden holds a minority ownership stake in Ameridose but was not involved in its pharmacy operations.

In early 2011, Ameridose moved out of its Framingham, Massachusetts, facility - which was near NECC's operations - and into a modern, 70,000-square-foot building in nearby Westborough to accommodate its growing operations.

Dr. Madeleine Biondolillo, director of the Massachusetts Department of Public Health's Bureau of Healthcare Safety and Quality, said that there is no evidence Ameridose's products have been compromised and it has not requested a recall.

NECC had come to the attention of state and federal regulators following complaints going back to 2002.

Cadden's own personal pharmacist license is subject to a restriction preventing him from practicing, at least for now, according to public records. More details were not available.

Alaunus Pharmaceutical, a drug distributor which is also owned by Cadden and Conigliaro, will temporarily cease distribution of all products made by Ameridose or any other company under shared ownership, regulators said.

COMPOUNDING PROBLEMS

Compounding pharmacies such as NECC are permitted to make medications based on specific prescriptions for individual patients.

State and federal regulators are investigating how thousands of vials of preservative-free methylprednisolone acetate were shipped to healthcare facilities in multiple states and infected 138 people in several across multiple states.

In 2004, the U.S. Food and Drug Administration and the Massachusetts Board of Pharmacy inspected NECC and in 2006 the FDA issued a warning letter, taking NECC to task for opening sterile products and repackaging them in a way that could damage human health. It said it was particularly concerned about NECC's splitting of the cancer drug Avastin into multiple doses to be used to treat an eye condition.

"Microbes could cause endophthalmitis, which has a high probability for significant vision loss," the agency said in its warning letter. "The absence of control over storage, and delays before use after repackaging, only exacerbate these concerns."

Erica Jefferson, a spokeswoman for the U.S. Food and Drug Administration, said that the FDA's legal authority to regulate compounded drugs is complex and has been challenged vigorously by the compounding industry both in courts and Congress.

The FDA also warned NECC in 2006 that it was against the law for it to sell compounded drugs without first receiving a prescription for an individually identified patient.

"Your firm has reportedly also told physicians' offices that using a staff member's name on the prescription would suffice," the letter said.

NECC did not respond though its public relations firm to questions asking whether it had rectified the problems identified by the FDA six years ago. The Massachusetts Department of Health also did not respond to questions about whether it followed up on complaints made against NECC and reflected in the FDA's warning letter.

"Our shared investigation with our federal partners at the FDA continues and will be comprehensive," Biondolillo said at a press conference. "This includes quality and safety across the corporate entity, including but not limited to, corporate ownership and governance structures at NECC and Ameridose."

IN BUSINESS WITH BROTHER-IN-LAW

Ameridose was formed in February 2006 and has built itself into one of the country's leading providers of prefilled syringes and premixed intravenous and epidural pain medications. Recent clients have included Kern Medical Center in Bakersfield, California, which this year renewed a deal for up to $1 million, public records show. It has also won contracts with the U.S. Department of Veterans Affairs and the U.S. Army Medical Command.

"There are no other sources known that would provide products to support our patients," the Army said in a July 2012 contract disclosure notice.

In June, Ameridose won a contract to compound and repackage drugs for Brentwood, Tennessee-based HealthTrust Purchasing Group LP, a consortium of hospitals and surgery centers with combined annual purchasing volume of more than $20 billion and whose owners include hospital giant HCA Holdings Inc .

In 2008, Ameridose recalled 155 injectable doses of the narcotic painkiller fentanyl because of concerns they were too potent, FDA records show. And it fought a battle with Irving, Texas-based Novation LLC, which purchases products on behalf of a network of clients using its group purchasing power to negotiate discounts.

The two recently settled a lawsuit in which Ameridose claimed it had been slandered by Novation spreading word that Ameridose's quality control standards were subpar, according to documents filed in U.S. District Court in Massachusetts.

Novation said in a statement that while it "vigorously disputed each and every claim made in the lawsuit" the parties ultimately agreed to settle. It declined to say why.

(Reporting by Toni Clarke; Editing by Martin Howell and David Gregorio)